A Few Notes on Housing Prices in San Diego

Well, pretty much everyone in the area, and elsewhere, is aware of the prices here and what has happened in the last several years with real estate. San Diego was one of the hottest real estate markets for some time and made lots of headlines as a result. And now we continue to make headlines about how things have changed - the drop off in sales, the potential housing bubble, the shift from seller's to buyer's market, and more. It seems the media relishes the idea that San Diego, after having such a hot real estate market, is now experiencing such a dramatic dropoff, and is leading major California cities in this trend. While there is lots of doom and gloom floating around, one has to wonder...is it really that bad? After all, when you examine the rates, time on market, inventory and other factors, it really seems to match what has generally been considered a normal market.

Sure, the days of monthly appreciation, multiple offers, and homes sold in days and at or above full price are gone. But prices just can't continue to rise without some impact on the populace here. After all, salaries are not keeping pace and interest rates have risen. What seems to be most troubling is that the shift has been so dramatic (I went through this while living in Boston a few years ago), but perhaps the fact that we don't know for sure what the future holds is also scary. And the media headlines don't help.

We are not seeing the dramatic price changes that have been predicted for a couple of years. Yes, the most recent report indicated that the August 2006 median existing home price for San Diego County was down 1.4% compared to a year ago (the peak median price), but it matches the median price in January of 2006 (that shift represents about $9,000 on a $637,000 property). And yes, the inventory is way up, although it dropped a bit last month. The number of sales has dropped off significantly, but we are still having what appears to be the 3rd busiest year, and while some towns have seen some minor price drops (isn't that a good thing for buyers wanting to get into the market??), in general the prices move around each month as the inventory shifts, which is typical. The monthly statistics I compile from the MLS for the coastal communities indicates the median price in each town, for attached and detached homes, shifts pretty much on a monthly basis as compared to a year ago. Take a look at this recent article in the North County Times to get a good perspective on why there is no need for panic.

Many buyers are sitting on the fence and waiting to see what happens. That may or may not be the best financial strategy for you depending on your circumstances. A recent CNNMoney.com article on Bubble Sitting is worth a look. Some good things to think about if you are a fence sitter.

Admittedly, this is a frustrating market for many, particularly sellers. Here are just a few things that we are seeing: (1) there is lots of competition; (2) homes are taking an average of about 90 days to sell (and more time in many areas) with some contracts expiring and homes being relisted, or listed with a new agent; (3) buyers are looking but not buying; (4) the inventory is enough to last 6 months (and more in many areas), which means it is a buyer's market by NAR definition; (5) we are seeing lots of low-ball offers and buyers backing out of deals; (6) escrows are longer; (7) some banks are requiring secondary reviews on appraisals when downpayments are less than 20%; and (8) there is lots of speculation about interest rates, what the feds will do, and how this may impact the market. So there are many issues to think about.

The best advice is to find a Realtor that you feel you can trust, and who will give you a honest overview of the current market so you can make the choice that is right for you and your personal real estate situation. If I can be of assistance, give me a call (760-840-1360) or shoot me an email.